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EMC to Buy Data General

UPDATE -- Storage giant EMC Corp. (www.emc.com) will buy Data General Corp. (DG, www.dg.com) for about $1.1 billion in a deal that gives EMC access to Windows NT and other mid-range storage accounts that the company has identified as important to its growth.

The deal, announced today, is subject to approval by Data General stockholders and regulators and is expected to close before year's end.

"The acquisition delivers on our long-stated objective of constantly expanding our market opportunities," Michael C. Ruettgers, EMC president and CEO, said in a statement.

Traditionally selling to high-end accounts, EMC’s systems are highly regarded and expensive. The company has publicly aimed for $10 billion in revenues, a goal that requires the company to enter new markets. Data General’s products give EMC a less expensive product line to sell in the mid-market. Windows NT-based storage has been projected to grow exponentially over the next few years, meaning the mid-market represents a huge business opportunity.

"Data General’s products have proven technology leadership in the midrange storage market, particularly in the Windows NT and Unix environments, but have lacked the global distribution and support needed to achieve their full market potential," Ruettgers said. "We believe they will provide an excellent complement to our high-end Symmetrix Enterprise Storage family and will enable us to serve this growing market segment."

Jonathan Eunice, an analyst at Illuminata Inc. (www.illuminata.com), says the acquisition is a good move for EMC. "The Clariion group has some great technology," Eunice says. "EMC has followed a traditional go for the gold and then for the silver [strategy]. Their initial product and targeting was for the biggest of the big. They’re scaling down. This is definitely a good medium-business attack for EMC."

Data General has another major business unit focused on servers, known as Aviion. In an official statement on the deal, EMC said it would run Aviion as a separate business unit; leverage DG’s research and development across EMC’s line of products; and continue to focus on the non-uniform memory access (NUMA) architecture, enterprise Windows NT and the computing needs of the worldwide healthcare market.

Illuminata’s Eunice predicts EMC will try to sell the Aviion unit. "EMC is a very pure storage play. I do not understand where a server business fits in," he says.

EMC says it will count the acquisition as a pooling of interests and a tax-free exchange of shares. Under the terms of the agreement, EMC will issue 0.3262 of a share of EMC stock for each share of Data General common stock, subject to certain adjustments. At about $19.58 per DG share, the deal adds up to $1.1 billion.

EMC is headquartered in Hopkinton, Mass. Data General is located nearby in Southboro, Mass.-- Brian Ploskina and Scott Bekker